I bought a new computer last month; I paid $2,200 for a top-of-the-line Apple MacBook Air. I already know that after a year or so I'll get the itch to upgrade, at which time I'll shell out another couple of thousand dollars for the latest model.
But, as a smart guy (and a finance writer), it occurred to me that maybe there's a more cost-effective way to keep current with technology. I looked into leasing--something I'd always avoided, mainly because I don't like the idea of not owning my equipment. But leases do have their advantages:
1. Low costs in the short term.
By leasing, you get the tools you need without paying the full cost upfront. Payments are regular and fixed, which makes budgeting easy.
2. More credit.
It's usually easier to get a lease than a loan for new equipment. And, because leases aren't bank loans, your lines of credit are freed up for other needs.
3. Tax savings.
Often lease payments can be deducted as business expenses (without the messy depreciation calculations).
4. Easy upgrades.
Computers and other devices age quickly. When you buy, you're stuck with outdated technology after a year or two. When you lease, you're able to exchange a piece of obsolete equipment for the latest model once the contract expires.
Thinking beyond my business needs, I considered what else in my life I could have leased or rented rather than purchased outright. From power tools to skis to camcorders, I realized that I've accumulated a lot of personal items that were used once or twice, or maybe for a few months, and are now gathering dust in my garage.
I was left with an epiphany on the lease-or-purchase issue--a question to ask myself whenever it comes to acquiring new stuff: "Would I buy this at a rummage sale five years from now?" More often than not, the answer is no. And if that's the case, it's not something I need to own (but if I still want it, maybe leasing is the way to go).
In the end, all I'm doing is applying the same cost-benefit analysis that goes into business purchases to my personal life. Once I began doing this, I saw myself surrounded by a bunch of inventory that is, it's sad to admit, essentially unused, obsolete or worthless. How did that happen?
Buying things can feel good. We all know that. But now that I'm armed with a more businesslike approach to my purchasing decisions, I can hold my impulses in check whenever there's something I need (or simply want) for a job or for fun, but will likely never use again. Done right, this approach should leave me with more money in my retirement account--and a lot more space in my garage.